Category

Event-Driven

Feb 25
0

Event-Driven: Mapletree Commercial Trust, Sberbank of Russia PJSC, Hang Seng China Enterprises Index, Apollo Hospitals Enterprise, Z Energy Ltd, Bank Of Baroda, FSN E-Commerce Ventures (Nykaa), Playtech Plc, CIMIC Group Ltd, LG Energy Solution and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Mapletree (MCT & MNACT) Response to SIAS
  • Russia: MSCI/FTSE Flows in Case of Deletion
  • HSCEI Dividend Futures: Stay Short the 2022/23 Steepener
  • NIFTY50 Index Rebalance: Apollo Hospitals to Replace IOC
  • Z Energy Scheme Meeting on 25 March, IE Opinion
  • NIFTY Bank Index Rebalance: BOB to Replace RBL Bank
  • NIFTY NEXT50 Index Rebalance: Zomato, PayTM, Nykaa Among the Adds
  • Playtech (PTEC LN): A Nuanced Flutter
  • ACS/Hochtief/CIMIC: Rationalization of Holding Structure
  • LG Energy Solution: End of the One Month Lock Up Period & More Selling Likely Ahead

Mapletree (MCT & MNACT) Response to SIAS

By Travis Lundy

  • SIAS posed questions to both Mapletree Commercial Trust (MCT SP) and Mapletree North Asia Commercial Trust (MAGIC SP) (a.k.a. “MNACT”) about how the ratio was decided and deal appropriateness.
  • SIAS also asked about whether the deal was absolutely necessary and whether MCT would change its mandate. 
  • MCT and MNACT responded with lengthy explanations, some of which didn’t answer the questions. That’s what we get til the end-March Circular. And that’s OK. The trade is the same.

Russia: MSCI/FTSE Flows in Case of Deletion

By Brian Freitas

  • Investment related sanctions by the US and UK Governments could lead to the deletion of some or all Russian equities from the MSCI and FTSE indices.
  • Deletion from the FTSE All-World/All-Cap indices would result in an outflow of US$6.67bn, while deletion from the MSCI Standard/Small Cap indices would result in an outflow of US$15.74bn.
  • The most selling will be on Gazprom PJSC (GAZP), LUKOIL (LKOH), Sberbank of Russia PJSC (SBER), MMC Norilsk Nickel PJSC (GMKN), Novatek PJSC (NVTK), Yandex (YNDX) and Tatneft PJSC (TATN).

HSCEI Dividend Futures: Stay Short the 2022/23 Steepener

By Brian Freitas

  • The HSCEI 2022 dividend futures are trading around our fair value. Larger than expected special dividends from oil and telecom companies could provide some upside.
  • The HSCEI 2022/23 div steepener has dropped from -5 to -15 since our last Insight. We see further downside here and would look to add to shorts in the spread.
  • With rising interest rates, higher inflation, higher oil prices, a slowdown could lead to a rapid repricing of dividends and there will be opportunities to buy back the spread lower.

NIFTY50 Index Rebalance: Apollo Hospitals to Replace IOC

By Brian Freitas

  • As expected, Apollo Hospitals Enterprise (APHS IN) will replace Indian Oil Corp (IOCL IN) in the NIFTY Index (NIFTY INDEX) after the close of trading on 30 March.
  • The index methodology has been changed to make new listings eligible for index inclusion if they complete one month by the review cutoff date, down from three months earlier.
  • Estimated one-way turnover is 0.63% and will result in a one-way trade of around INR 14bn. Passive trackers will have a lot to trade on the stocks.

Z Energy Scheme Meeting on 25 March, IE Opinion

By Arun George

  • Caltex Australia (ALD AU)’s offer of NZ$3.76 per share is near the mid-point of the independent expert (IE) assessed range of NZ$3.54-4.07. We think that IE’s valuation approach is sound.    
  • The offer includes an adjustment mechanism to pay NZ0.055 cents per share for each calendar day the implementation date extends beyond 31 March, up to a limit of NZ10 cents. 
  • We think that the offer is attractive for Z Energy Ltd (ZEL NZ) shareholders. For a 30 June implementation date, the gross and annualised spread is 5.0% and 15.2%, respectively. 

NIFTY Bank Index Rebalance: BOB to Replace RBL Bank

By Brian Freitas

NIFTY NEXT50 Index Rebalance: Zomato, PayTM, Nykaa Among the Adds

By Brian Freitas

  • Inclusions are FSN E-Commerce Ventures (NYKAA), Mindtree Ltd (MTCL), Paytm (PAYTM), SRF Ltd (SRF) and Zomato (ZOMATO), while Indian Oil Corp (IOCL IN) moves lower from the NIFTY Index.
  • Deletions are Aurobindo Pharma (ARBP), Hindustan Petroleum (HPCL), Indraprastha Gas (IGL), Jindal Steel & Power (JSP) and Yes Bank (YES), while Apollo Hospitals (APHS) moves up to the NIFTY Index.
  • Estimated one-way turnover on the NIFTY NEXT50 Index is 10.24%, the one-way trade is INR 8,486bn and there is over 1 day of ADV to trade on a few stocks.

Playtech (PTEC LN): A Nuanced Flutter

By David Blennerhassett

  • On the 2 February, Playtech Plc (PTEC LN)‘s shareholders voted down Aristocrat Leisure (ALL AU)‘s £2.1 billion Offer.
  • The Offer failed after Playtech was unable to engage with a block of Asia-based investors who owned ~28% of the company.
  • As a developer of online casino games, Playtech is an obvious target. Reportedly its second-largest investor and two Playtech CEOs – former and current – are piecing together a deal. 

ACS/Hochtief/CIMIC: Rationalization of Holding Structure

By Jesus Rodriguez Aguilar

  • Hochtief offers A$22/share in cash, a 33% premium to the closing share price on the prior day, and the offer is final. The offer is a relatively low amount.
  • The deal should complete. The premium is generous, as the 15.4x P/22e E paid is high given that Hochtief and ACS are trading at 9.9x and 11.3x, respectively.
  • ACS trades at 27% discount to NAV. Holding structure rationalization and c. €5 billion received should be a catalyst for discount tightening. Long 1 ACS SM/short 0.4162 HOT GR.

LG Energy Solution: End of the One Month Lock Up Period & More Selling Likely Ahead

By Douglas Kim

  • In this insight, we discuss the end of the one month lock up period and more block selling ahead by major investors for LG Energy Solution in the weeks ahead.
  • There are 1.75 million shares under the one month lock-up period, representing 0.7% of outstanding shares. 
  • At current price of 416,500 won, we believe there is an additional 11% downside risk to LG Energy Solution shares over the next 3-6 months (using the base case valuation).

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Feb 24
0

Event-Driven: Japan Post Bank, CIMIC Group Ltd, Volkswagen (Pref), LG Energy Solution, Bardoc Gold, LG Electronics, Indra Sistemas Sa and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Japan Post Bank – A Double on Spread Expansion and More on a Buyback?
  • CIMIC (CIM AU) Takeover Offer: Should Get Done; Index Implications
  • Hochtief’s Unconditional Offer For CIMIC
  • VW Gains On Potential Porsche IPO. PAH3 Gains Even More
  • CIMIC (CIM AU) Replacement in ASX200
  • LG Energy’s KOSPI 200 Float Is 15%: Weight Adjustment Trading for Other Constituents
  • Bardoc – St Barbara Merger: Scheme Booklet Out; Still Wide + ASX200 Index Kicker
  • LG Electronics: Impact of Restructuring the Solar Panel Business
  • CIMIC in an Off-Market Takeover Bid by Hochtief
  • SEPI to Raise Stake in Indra

Japan Post Bank – A Double on Spread Expansion and More on a Buyback?

By Mio Kato

  • Japan Post Bank is down 15.2% since its earnings results as quarterly profit declined noticeably. 
  • This was driven by falls in income from PE investments and a reduction in gains on forex from maturing investments. 
  • While that is a sharp fall for the name, its overall risk profile, exposure to rising rates and cheap valuations make it extremely attractive in our view.

CIMIC (CIM AU) Takeover Offer: Should Get Done; Index Implications

By Brian Freitas

  • Hochtief AG (HOT GR) holds 78.58% of CIMIC Group Ltd (CIM AU) and has made an offer to acquire the remaining shares at A$22/share.
  • Hochtief will squeeze out the remaining shareholders once it holds more than 90% of the shares in CIMIC Group Ltd (CIM AU). 
  • We think the offer is fair and expect the stock to open close to A$22/share tomorrow. There could be ad hoc inclusion to the ASX200 index in May or June.

Hochtief’s Unconditional Offer For CIMIC

By David Blennerhassett

VW Gains On Potential Porsche IPO. PAH3 Gains Even More

By David Blennerhassett

  • Volkswagen (VOW GR) said it was in advanced talks with its controlling shareholder, the Porsche-Piëch family, over IPOing the iconic Porsche car brand.
  • VW gained as much as 10.2%, lagging Porsche Automobil Holding Se (PAH3 GR)‘s intra-day-high of 15.2%.
  • Proceeds from a potential IPO would ostensibly support VW’s electric vehicle roll-out. But expect the founding families to be also looking to fill their boots. 

CIMIC (CIM AU) Replacement in ASX200

By Travis Lundy

LG Energy’s KOSPI 200 Float Is 15%: Weight Adjustment Trading for Other Constituents

By Sanghyun Park

  • The local street hears KRX has bumped it up to 14.68%. With the 1% rounding applied, it becomes 15%.
  • It is extremely rare for a Fast Entry to come in with a float market cap of +₩10T. So, we will see significant weight adjustments for the other constituents.
  • As we move towards the implementation date, we can consider basket-shorting those high-impact names for LG Energy’s long hedge.

Bardoc – St Barbara Merger: Scheme Booklet Out; Still Wide + ASX200 Index Kicker

By Janaghan Jeyakumar, CFA

  • The Scheme Booklet for the Bardoc Gold – St Barbara Deal was published today. The Scheme Meeting will be held virtually at 1:00pm (Perth time) 30th March 2022.
  • The Independent Expert has concluded that, in the absence of a Superior Proposal, the Scheme is fair and reasonable and therefore in the best interests of Bardoc Scheme Shareholders.
  • Below is a discussion on the developments since my previous insight Bardoc Gold – St Barbara Merger. 

LG Electronics: Impact of Restructuring the Solar Panel Business

By Douglas Kim

  • On 23 February, LG Electronics announced that it will exit the solar panel business due to lack of competitiveness as it has been losing money in this business. 
  • This restructuring will have a positive impact on LG Electronics. We applaud its strategy of focusing on what it does best and exiting businesses where it is not competitive. 
  • Assuming operating loss of 80 billion won and a 9% cost of capital, this would result in perpetuity value losses of 889 billion won.

CIMIC in an Off-Market Takeover Bid by Hochtief

By Arun George

  • Hochtief AG (HOT GR) announced an unconditional off-market takeover offer for CIMIC Group Ltd (CIM AU) at A$22.00 cash per share, a 33.4% premium to the last close price. 
  • The offer’s implied forward EV/EBITDA multiple is at a discount to peer multiples. However, the offer is attractive compared to historical and transaction multiples.  
  • The offer presents a reasonable exit for minorities tired of the weak share price due to years of troubled contracts.

SEPI to Raise Stake in Indra

By Jesus Rodriguez Aguilar

  • SEPI will increase its stake in Indra Sistemas Sa (IDR SM) by 9.25% (22.2 days of trading volume) up to 28%, which should have a positive impact on the share price.
  • Indra has dropped 9.4% on market fears that the Government might interfere in the company’s strategy. Nevertheless, this in my view, provides an entry point.
  • My DCF valuation of Indra is €12.12/share, which implies 44% upside. I believe share purchases should act as a short-term catalyst for the share price.

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Feb 23
0

Event-Driven: Mapletree Commercial Trust, Razer Inc, LG Energy Solution, Noritsu Koki, JMDC Inc, G J Steel PCL, Meritz Fire & Marine Insurance, Apollo Tourism & Leisure Ltd and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • SIAS Also Questions MCT/MNACT Merger, Countering/Supporting Quarz
  • Razer Inc (1337 HK): Pre-Conditions Done
  • KOSPI200 Index Rebalance (March): LG Energy IN; Dongwon F&B Out
  • Noritsu Koki (7744) – PAAAAYDAAAAY!
  • JMDC (4483 JP) – A Change of Ownership, and Future Path
  • GJ Steel: Nippon Steel’s Offer Opens On The 23 February
  • KOSPI 200: LG Energy Solution Inclusion and Dongwon F&B Exclusion
  • Razer’s Offer Spread Risk/Reward – Pre-Conditions Fulfilled
  • Meritz Financial & Meritz Fire Buybacks: Flow Estimations with MSCI/K200 Inclusion Factored
  • Apollo – THL: Scheme Booklet Out, Meeting on 20th April 2022

SIAS Also Questions MCT/MNACT Merger, Countering/Supporting Quarz

By Travis Lundy

  • Quarz wrote an open letter questioning the Mapletree North Asia Commercial Trust (MAGIC SP) deal with MCT for MNACT shareholders, discussed here. They wrote another letter last Thursday.
  • Now, Securities Investors Association (Singapore) SIAS has come out with an open letter to MCT management questioning the deal. 
  • There are now activists on both sides questioning this deal. That is not necessarily a bad thing. 

Razer Inc (1337 HK): Pre-Conditions Done

By David Blennerhassett

  • Razer Inc (1337 HK) has announced the remaining pre-conditions have now been fulfilled.
  • The next step is the Scheme vote, which may be held in early May, with possible completion in early June.
  • Despite SAMR approval last month, this transaction continues to trade wide to terms on concerns retail investors will disrupt the headcount test.

KOSPI200 Index Rebalance (March): LG Energy IN; Dongwon F&B Out

By Brian Freitas

Noritsu Koki (7744) – PAAAAYDAAAAY!

By Travis Lundy

  • Noritsu Koki (7744 JP) just sold two-thirds of its stake in subsidiary JMDC Inc (4483 JP) to Omron Corp (6645 JP) for ¥112bn – pretty good for a ¥61bn marketcap.
  • This is the payday for those who have been long NK as a proxy for JMDC and possibly short JMDC against it. Now the shape of the company is different.
  • A closer look at the pro-forma financial profile is warranted. It’s a lot of money. BUT… if you look today and buy today you do NOT get the special div!

JMDC (4483 JP) – A Change of Ownership, and Future Path

By Travis Lundy

  • JMDC Inc (4483 JP) or formerly Japan Medical Device Corp was incubated then IPOed by Noritsu Koki (7744 JP). Noritsu Koki is now selling two-thirds of its stake to OMRON. 
  • OMRON’s heft should help JMDC grow better with larger clients. That’s the bet OMRON is making too.
  • The sale by Noritsu Koki reduces potential overhang from a share sale which heretofore had been a possibility. 

GJ Steel: Nippon Steel’s Offer Opens On The 23 February

By David Blennerhassett

  • Both G J Steel PCL (GJS TB) and G Steel (GSTEL TB) have announced Form 247-4, the Notification on Receipt of the Tender Offer for Securities, from Nippon Steel.
  • As expected, the Offer period is for 25 days, between 23 February and 29 March. The payment is the 31 March. 
  • GJS is trading tight to terms. The Offer is unconditional.

KOSPI 200: LG Energy Solution Inclusion and Dongwon F&B Exclusion

By Douglas Kim

  • On 22 February, the KRX announced that LG Energy Solution (373220 KS) will be included in numerous local indices including KOSPI 200, KOSPI 100, and KRX 100 effective 3/11/2022.
  • This has been widely expected by the market. Due to the inclusion in KOSPI 200, investors will be able to short LG Energy Solution starting 11 March. 
  • Once Dongwon F&B is excluded from the KOSPI 200 index, this could be a key buying opportunity on this stock, given the company’s solid fundamentals. 

Razer’s Offer Spread Risk/Reward – Pre-Conditions Fulfilled

By Arun George

  • Razer Inc (1337 HK) announced that all the pre-conditions were fulfilled. The scheme document will be released after the FY21 results (scheduled on or before 17 March).  
  • The headcount test is a key challenge. While the deal’s success benefits from the de-rating of technology shares, it is also undermined by Logitech International SA (LOGN SW)’s strong 3Q. 
  • The shares are broadly fairly valued at last close both on a SoTP and deal probability basis. We would be buyers up to HK$2.5 per share (implies 65% deal probability).

Meritz Financial & Meritz Fire Buybacks: Flow Estimations with MSCI/K200 Inclusion Factored

By Sanghyun Park

  • Meritz Financial Group and Meritz Fire once again announced stock buybacks worth 100 billion won each. Like last time, this will likely be completed within 2-3 months.
  • This buyback size is not small: 1.86% and 1.95% of SO. Assuming that the buyback completes with equal volume for 60 trading days, it is 0.08x and 0.06x ADTVs, respectively.
  • Of particular note is Meritz Fire. It is because the KOSPI 200 inclusion is waiting even after March 1. Approximately ₩0.10T of passive money will flow in.

Apollo – THL: Scheme Booklet Out, Meeting on 20th April 2022

By Janaghan Jeyakumar, CFA

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Feb 22
0

Event-Driven: SK Square, CK Infrastructure Holdings, Postal Savings Bank Of Chi-A, Nice Holdings, China Development Financial, China Overseas Land & Investment, Siemens Gamesa Renewable Energy, S.A., Caregen Co Ltd, Jyske Bank A/S, SK Telecom and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • StubWorld: SK Square And LG Chem’s Unjustified NAV Discounts
  • FTSE GEIS March 2022 SAIR: Share/Float Changes
  • FTSE China A50 Index Rebalance Preview (March 2022): Big Impact of FOL Changes
  • Buybacks in Progress at KOSPI/KOSDAQ: Stocks to Watch From a Trading Perspective
  • FTSE TWSE Taiwan 50 Index Rebalance Preview: China Dev Fin (2883) Should Replace Pegatron (4938)
  • FTSE China 50 Index Rebalance Preview (March): Nongfu, COLI, XPeng Potential Adds
  • Siemens Energy/Siemens Gamesa: Takeover Conundrum
  • KOSDAQ 150 Special Change: Momentum Trading on Caregen Right Before Inclusion
  • STOXX Europe Indices: Quiddity Leaderboard for March 2022 Rebalance (Final)
  • KOSPI/KOSDAQ Quarterly Dividend Stocks: DPS & Yield Estimations

StubWorld: SK Square And LG Chem’s Unjustified NAV Discounts

By David Blennerhassett

  • SK Square (402340 KS) was inexpensive after its November listing. Now it’s even cheaper. 
  • Preceding my comments on SK Square – and LG Chem Ltd (051910 KS) – are the current setup/unwind tables for Asia-Pacific Holdcos. 
  • These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

FTSE GEIS March 2022 SAIR: Share/Float Changes

By Brian Freitas

  • FTSE announced the changes to the All-World/All-Cap indices post market close on Friday. There were changes to the number of shares and free floats for quite a few stocks too.
  • There are a few stocks where the passive flow and impact is large and quite a few of these stocks have moved today. They could move more till implementation.
  • At the close on 4 March, HSI trackers will sell CK Infrastructure Holdings (1038 HK) due to a float reduction. Then the FTSE trackers will sell on 18 March.

FTSE China A50 Index Rebalance Preview (March 2022): Big Impact of FOL Changes

By Brian Freitas

  • Todays closing prices will be used to determine the inclusions and exclusions at the March rebalance. We see PSBC and Bank of Ningbo replacing EVE Energy and Aier Eye.
  • There will also be changes to the investability weight of the stocks following the Ground Rule change that will cap stocks at their Foreign Ownership Limits.
  • Change to the index constituents and FOL changes will result in a one-way turnover estimated at 16.64% and will result in a one-way trade of CNY 9,322m.

Buybacks in Progress at KOSPI/KOSDAQ: Stocks to Watch From a Trading Perspective

By Sanghyun Park

  • I filtered 42 buybacks currently in progress at KOSPI/KOSDAQ, which have a market cap of over 200 billion won.
  • Of these, 15 buybacks have their buyback volume exceeding 1% compared to SO, and buyback completion % is currently below 50% at present.
  • Among these, we should pay attention to those whose buybacks are being completed relatively early. These names also show a good correlation with stock prices.

FTSE TWSE Taiwan 50 Index Rebalance Preview: China Dev Fin (2883) Should Replace Pegatron (4938)

By Brian Freitas

FTSE China 50 Index Rebalance Preview (March): Nongfu, COLI, XPeng Potential Adds

By Brian Freitas

  • We expect Nongfu Spring (9633), China Overseas Land & Investment (688) and XPeng (9868) to replace Geely Auto (175), China Tower (788) and JD Health (6618) in the index.
  • There will also be some big capping changes that will result in one-way turnover estimated at 9.2% and in a one-way trade of HK$4,910m.
  • Nongfu Spring (9633 HK) is a triple inclusion – HSI at the close on 4 March, FTSE All-World at the close on 18 March and possibly the FTSE China50 too.

Siemens Energy/Siemens Gamesa: Takeover Conundrum

By Jesus Rodriguez Aguilar

  • Investors are pressing Siemens Energy (67% owner of Siemens Gamesa Renewable Energy, S.A. (SGRE SM))  to act in the wake of a downwards sliding share price.
  • DFC valuation (WACC 7.5%, 5y EV/EBITDA exit multiple of 5.5x, which conservatively implies no growth rate, which I consider adequate in a low visibility environment) gives a fair value of €16.4/share. 
  • An exclusion bid could be on the cards, and the premium need not be high, 20% could be enough, but that would still amount to c. €3.7 billion.

KOSDAQ 150 Special Change: Momentum Trading on Caregen Right Before Inclusion

By Sanghyun Park

  • KOSDAQ 150 will replace Osstem with Caregen at the close on March 16.
  • Even if we conservatively assume KOSPI 150’s direct rebalancing trading funds at ₩1.5T, Caregen will likely face a passive inflow of 4.76x ADTV.
  • So, it seems appropriate to approach this event as a short-term momentum trading with a small volume on Caregen right before the inclusion effective date.

STOXX Europe Indices: Quiddity Leaderboard for March 2022 Rebalance (Final)

By Janaghan Jeyakumar, CFA

  • The STOXX Europe 600 Index is a benchmark index with a fixed number of 600 components representing large, mid and small capitalization companies across 17 countries of the European region.
  • The EURO STOXX Index is a subset of the STOXX Europe 600 Index and is also the parent index for the widely-tracked EURO STOXX 50 Index.
  • Below is a look at the Potential Adds and Deletes for the STOXX Europe 600 Index and the EURO STOXX Index in the upcoming index review in March 2022.

KOSPI/KOSDAQ Quarterly Dividend Stocks: DPS & Yield Estimations

By Sanghyun Park

  • There are 71 interim dividend stocks on KOSPI and KOSDAQ. Of these, 9 stocks pay quarterly dividends: 7 KOSPI and 2 KOSDAQ.
  • All except POSCO and Shinhan Financial employ an equal quarterly split. As expected, SKT offers the highest quarterly dividend yield. At the last closing price, it is 1.55%.
  • Since the absolute yield level is tight, it may not be appropriate to consider a dividend arb play, except for SKT. Nevertheless, it may act as short-term price momentum.

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Feb 21
0

Event-Driven: HomeCo Daily Needs REIT, AGL Energy Ltd and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • ASX200 Index Rebalance: HDN AU Inclusion Is a Matter of Time (Or Timing)
  • Brookfield/Cannon-Brookes Lowball Bid for AGL (AGL AU) Likely to Get the Kibosh.

ASX200 Index Rebalance: HDN AU Inclusion Is a Matter of Time (Or Timing)

By Brian Freitas

  • Aventus Group (AVN AU) received the ATO tax ruling on 18 February. This creates some uncertainty around the timing of the HomeCo Daily Needs REIT inclusion in the ASX200 Index.
  • Given the ‘latest available shares in issue’ are used, we think there is a better than even chance of the stock being included in the index at the March rebalance.
  • If HomeCo Daily Needs REIT (HDN AU) is not included in March, then it could replace Crown Resorts in May. Else, the stock will be added at the June rebalance.

Brookfield/Cannon-Brookes Lowball Bid for AGL (AGL AU) Likely to Get the Kibosh.

By Travis Lundy

  • AFR revealed late Saturday that Brookfield and Atlassian billionaire and recent green warrior Mike Cannon-Brookes had lobbed an A$8bn (4.7% premium) bid for AGL ahead of its vote to split.
  • The bid is too low, and would be fraught with competition issues, but it begs the question of whether the company would be better un-split and made greener, faster.
  • Other megacaps out there have expressed interest in owning Australian integrated utilities, and there are plans on the drawing board which would allow greening if more firming capacity investment arrived.

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Feb 20
0

Event-Driven: Orient Overseas International, Osstem Implant, HomeCo Daily Needs REIT, Emtek, Nongfu Spring, Hyundai Heavy Industries, SBI Sumishin Net Bank, Crown Resorts and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • HSCI Index Rebalance: 29 Adds, 12 Deletes & Changes to Stock Connect
  • KOSDAQ150 Ad Hoc Index Rebalance: Osstem Implant OUT; Caregen IN
  • The Weird Ways of the Aventus/HomeCo Daily Needs Index Rebalances (ASX200)
  • FTSE GEIS March 2022 SAIR: Changes, Switches & Same-Way Index Flow
  • Index Rebalance & ETF Flow Recap: HSI, HSCEI, HSTECH, HSCI, S&P/ASX, SET50, LIC, SBI Sumishin, Crown
  • KOSPI Lockup Releases: Details & Trading Approaches
  • Last Week in Event SPACE: SBI Sumishin Net Bank, Western Areas, Keisei Electric, Crown Resorts
  • KOSDAQ150: Details of Osstem Implant Exclusion & Caregen Inclusion and Case Study of SillaJen
  • Asia-Pac Weekly Risk Arb Summary: Crown Resorts, GJ Steel, Western Areas, Aussie Pharma, DTAC/True

HSCI Index Rebalance: 29 Adds, 12 Deletes & Changes to Stock Connect

By Brian Freitas

  • There are 29 inclusions and 12 deletions for the HSCI at the March rebalance. 26 of the inclusions will be added to Connect while all deletes will leave Stock Connect.
  • Some of the Stock Connect deletions have a lot of mainland holdings and there could unwinding of some of the positions ahead of becoming sell-only on the link.
  • Orient Overseas International, United Energy, Cloud Village and Gcl Poly Energy Holdings Limited could also move higher over the next couple of weeks before the stocks enter Stock Connect.

KOSDAQ150 Ad Hoc Index Rebalance: Osstem Implant OUT; Caregen IN

By Brian Freitas

The Weird Ways of the Aventus/HomeCo Daily Needs Index Rebalances (ASX200)

By Travis Lundy

  • When the Aventus Group (AVN AU) / HomeCo Daily Needs REIT (HDN AU) Scheme was announced four months ago, it looked to complete in late January or very early February. 
  • Because of an ATO staff shortage, the Second Court Hearing was delayed by nearly three weeks, pushing implementation back. The calculation of S&P/ASX index rankings may not be as expected.
  • Most or all of the AVN downweight is covered by a HDN upweight next Wednesday but whither ASX200 in March?

FTSE GEIS March 2022 SAIR: Changes, Switches & Same-Way Index Flow

By Brian Freitas

  • FTSE announced the results of the March SAIR for the FTSE All-World/All-Cap indices on Friday. There are 337 changes (adds, deletes, migrations across AW/AC) across Asia-Pac.
  • Nongfu Spring (9633 HK) will have the largest inflows and is a high probability inclusion to the FTSE China 50 index. Its inclusion in the HSI INDEX was announced Friday.
  • FTSE will switch index membership from the US ADRs to the HK listings for ZTO Express, GDS Holdings, Baidu and Bilibili. This should result in larger CCASS holdings.

Index Rebalance & ETF Flow Recap: HSI, HSCEI, HSTECH, HSCI, S&P/ASX, SET50, LIC, SBI Sumishin, Crown

By Brian Freitas

  • Hang Seng announced the results of the March rebalance post market close Friday. Two adds for the HSI, one set of changes for HSCEI, three sets for HSTECH.
  • An ad hoc rebalance was announced for the KOSDAQ150 following Osstem being designated an ‘Administrative Issue’. In IPO world, we have LIC in India and SBI Sumishin NetBank coming up.
  • Friday was the review cutoff date for the March rebalance of the ASX200 Index. The ATO has provided Aventus with the tax ruling and that creates a timing issue.

KOSPI Lockup Releases: Details & Trading Approaches

By Sanghyun Park

  • The stocks worth our attention are mostly IPO institutional lockup releases. In particular, LG Energy, Iljin HySolus, and Hyundai Heavy Industries will be of the most interest.
  • Most of these have undergone significant price corrections. Nevertheless, current prices significantly outperform the offering prices. So, the incentives for IPO institutional investors to realize profits should be pretty intense.
  • Kakao Pay’s volume isn’t that much. Even with a heavier release last time, it didn’t meet our expectations. Probably it is because it is bottoming out at the current level.

Last Week in Event SPACE: SBI Sumishin Net Bank, Western Areas, Keisei Electric, Crown Resorts

By David Blennerhassett

KOSDAQ150: Details of Osstem Implant Exclusion & Caregen Inclusion and Case Study of SillaJen

By Douglas Kim

  • On 18 February, the KRX announced that the deletion of Osstem Implant (048260 KS) and the inclusion of Caregen Co Ltd (214370 KS) in KOSDAQ150.
  • The South Korean Presidential election will be held on 9 March and the KRX is not likely to make sensitive decisions such as the delisting of Osstem Implant in March.
  • We continue to like the pair trade (long KOSPI200 and short KOSDAQ150) which has worked out well in the past month and we expect continued gains on this trade.

Asia-Pac Weekly Risk Arb Summary: Crown Resorts, GJ Steel, Western Areas, Aussie Pharma, DTAC/True

By David Blennerhassett

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Feb 19
0

Event-Driven: HomeCo Daily Needs REIT, Hock Seng Lee, Western Areas, KB Financial, Nongfu Spring, Xinyi Solar Holdings, SenseTime Group and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • S&P/​​ASX Indices: Quiddity Leaderboard for March 2022 Rebalance (Final)
  • Hock Seng Lee (HSL MK): Unconditional Offer
  • Investors Caught Out As Twiggy Backs IGO’s Offer For Western Areas
  • Korean Companies Announcing Share Cancellations Are Outperforming the Market
  • HSI Index Rebalance: Nongfu Spring & Lenovo IN; Still Tiptoeing Towards 80 Index Members
  • HSCEI Index Rebalance: Another Evergrande Stock Is Deleted; Xinyi Solar IN
  • Hang Seng TECH Index Rebalance: Forced Changes Lead to BIG Turnover

S&P/​​ASX Indices: Quiddity Leaderboard for March 2022 Rebalance (Final)

By Janaghan Jeyakumar, CFA

  • The S&P/ASX Index family is a widely-tracked group of indices and sub-indices which represent the performance of ASX-listed companies. 
  • In March 2022, Index rebalance events will take place for the S&P/ASX capitalization-weighted indices including ASX 300, ASX 200, ASX 100, ASX 50, and ASX 20. 
  • In this insight, we take a look at the leading candidates who could become Adds/Deletes during the March 2022 Rebalance and other potential irregular changes.

Hock Seng Lee (HSL MK): Unconditional Offer

By David Blennerhassett

  • Hock Seng Lee (HSL MK) has announced an unconditional voluntary take-over offer of RM1.35/share.  
  • The joint ultimate offerors, led by director Yu Chee Hoe, currently hold 84.2%. 
  • HSL is already in non-compliance with  Bursa’s 25% free float. The Offeror does not intend to main HSL’s listing

Investors Caught Out As Twiggy Backs IGO’s Offer For Western Areas

By David Blennerhassett

  • Andrew Forrest’s Wyloo Consolidated, with 9.8% of shares out, will now support the IGO Ltd (IGO AU) / Western Areas (WSA AU), just three weeks after paying through terms. 
  • That pledge pivots off a newly-inked side agreement between IGO and Wyloo to jointly evaluate opportunities for nickel downstream processing in Australia.
  • This removes the immediate prospect of a competing Offer from Wyloo, and in turn, IGO’s need to bump terms. Yet BHP Group (BHP AU) still waits in the wings.

Korean Companies Announcing Share Cancellations Are Outperforming the Market

By Douglas Kim

  • In this insight, we have identified 16 Korean companies that have announced common shares cancellations in 4Q 2021 and 1Q 2022.
  • There has been a tremendous outperformance of KOSDAQ listed companies that have announced shares cancellations in this period. 
  • Given the continued outperformance of Korean companies that are outperforming the market after announcing treasury shares cancellation, this reflects an alpha generating trend that bears close scrutiny. 

HSI Index Rebalance: Nongfu Spring & Lenovo IN; Still Tiptoeing Towards 80 Index Members

By Brian Freitas

  • The Hang Seng Index was meant to have 80 constituents by mid-2022 before moving to 100 members. At 66 constituents post the March review, we are not gonna make it.
  • Nongfu Spring (9633 HK) and Lenovo (992 HK) will be added to the index. Nongfu’s inclusion was expected while Lenovo is a relative surprise.
  • Nongfu Spring (9633 HK) will also be added to the FTSE AW Index at the March SAIR at the close on 18 March. The stock should move higher.

HSCEI Index Rebalance: Another Evergrande Stock Is Deleted; Xinyi Solar IN

By Brian Freitas

Hang Seng TECH Index Rebalance: Forced Changes Lead to BIG Turnover

By Brian Freitas

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Feb 18
0

Event-Driven: JMT Network Services, Appier Group Inc, LG Chem Ltd, Tomson, Ultra Electronics Holdings and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • SET50 Index Rebalance Preview (June): Two Changes, Maybe Three
  • TOPIX Inclusion Pre-Event: Appier Group (4180 JP)
  • FnGuide & KRX K-New Deal Batteries: Combined Passive Flows Preview on March 10-15
  • Tomson Group (258 HK): The Next Rivera
  • Cobham/​Ultra Electronics: Updated Valuation and Spread

SET50 Index Rebalance Preview (June): Two Changes, Maybe Three

By Brian Freitas

TOPIX Inclusion Pre-Event: Appier Group (4180 JP)

By Janaghan Jeyakumar, CFA

  • Japan-Based AI company Appier Group Inc (4180 JP) announced they had resolved to prepare to apply to change its listing on the Tokyo Stock Exchange to the Prime Market.
  • Appier has confirmed that it meets the criteria for the TSE Growth Market but if they move to the Prime Market, that would trigger a TOPIX Inclusion Event.
  • Below is a look at Appier’s potential to satisfy the Section Transfer Requirements and the upside potential of this event.

FnGuide & KRX K-New Deal Batteries: Combined Passive Flows Preview on March 10-15

By Sanghyun Park

  • FnGuide Battery Index overlaps with the rebalancing of the KRX K-New Deal. K-New Deal is March 11. As for FnGuide Battery, it will be three trading days on March 14-16.
  • Among the top-cap stocks, Samsung SDI will be the biggest beneficiary, and we need to consider a setup that utilizes Samsung SDI as a long/short partner for LG Chem.
  • LG Chem’s staying significant distorts mid-caps’ index weight in KRX Battery. The extent of passive outflows would be pretty substantial. So, outright short these mid-caps should deserve our attention.

Tomson Group (258 HK): The Next Rivera

By David Blennerhassett

  • At 0.3x price to book, PRC property play Tomson (258 HK) is cheap. 
  • It is even cheaper when factoring in its net cash worth 90% of the market cap.
  • And it might continue to trade cheaply if not for the fact the controlling family recently privatised a connected company of Tomson’s.

Cobham/​Ultra Electronics: Updated Valuation and Spread

By Jesus Rodriguez Aguilar

  • The deal is expected to be referred for thorough analysis given political sensitivities as Ultra Electronics Holdings (ULE LN) is a key supplier to the UK’s army. Shorts are increasing.
  • The review should fall under the old rules though. My standalone fair value estimate (DCF based) is 3,184p. (vs. 2,950p comps-based implied valuation and 3,325p median Capital IQ consensus TP).
  • Long ULE LN, TP 3,500p, plus 16p interim. Upside is 17.2%. I just don’t see the UK Government blocking a friendly defence deal from an investor coming from a key ally.

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Feb 17
0

Event-Driven: Kadoya Sesame Mills, SBI Sumishin Net Bank, Gungho Online Entertainment, Champion Microelectronic Corp, KT Corp, Australian Pharmaceutical Industries, Enchem and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Deciphering the Dynamics of a Tachiaigai Bunbai Offering
  • SBI Sumishin Net Bank (7163 JP) IPO: Listing in March, TPX Inclusion Possibly in April
  • Gungho Is Gungho for Gungho (3765 JP)
  • Pan Jit Hostile/Unsolicited Partial Offer for Champion Micro (3257 TT)
  • KT Corp: Announces a Spin-Off of the Cloud and IDC Business
  • Aussie Pharma (API AU): Scheme Booklet Out. Meeting On The 17 March
  • Potential Additions and Deletions to KOSDAQ150 Rebalance in June 2022
  • SBI Sumishin NetBank (7163 JP) IPO Details, Fundamentals Tearsheet, and Likely Index Treatment

Deciphering the Dynamics of a Tachiaigai Bunbai Offering

By Travis Lundy

  • In Japan, there is a type of offering called a tachiaigai bunbai offering which is used by companies to conduct small, relatively low-cost, offerings to increase liquidity or shareholder breadth.
  • These are conducted with a bit over a week of warning, and there are usually very low limits of shares purchasable per applicant.
  • There are certain dynamics surrounding such tachiaigai bunbai which are worth understanding. 

SBI Sumishin Net Bank (7163 JP) IPO: Listing in March, TPX Inclusion Possibly in April

By Brian Freitas

  • SBI Sumishin Net Bank (7163 JP)‘s listing has been approved by the JPX and the stock is expected to start trading on 24 March. 
  • News reports indicate a raise of US$1bn (JPY 115.5bn). This translates to an IPO price of JPY 1,920/share, valuing the company at JPY 300bn (US$2.59bn).
  • The stock should be added to the TPX INDEX at the close on 27 April where trackers will need to buy over 14% of the stock issued in the IPO.

Gungho Is Gungho for Gungho (3765 JP)

By Travis Lundy

  • Gungho on Monday announced results, with both revenues and earnings up.
  • They also announced a buyback, which at current price means about 2.8% of shares out. 
  • That doesn’t sound like a lot, but context matters. It may matter a great deal. 

Pan Jit Hostile/Unsolicited Partial Offer for Champion Micro (3257 TT)

By Travis Lundy

  • Pan Jit International (2481 TT) appears to have launched an unsolicited/hostile partial Tender for 5.0-30.0% of the shares out of power management IC maker Champion Microelectronic Corp (3257 TT). 
  • The price is near but not at a medium-term (and all-time) high, and is made “for investment purposes but hoping for more.”
  • Insiders officially hold ~13.7% of the target. It would seem done, which means a defence effort and/or white knight is not out of the question. We will watch it develop.

KT Corp: Announces a Spin-Off of the Cloud and IDC Business

By Douglas Kim

  • On 15 February, KT Corp (030200 KS) announced that it will spin off the cloud and IDC business. 
  • KT will spin off the cloud and internet data center (IDC) business to set up subsidiary tentatively named KT Cloud starting 1 April.
  • KT’s valuations remain attractive and the spin-off of KT Cloud Business is also likely to aid on the continued outperformance of KT shares in the coming months. 

Aussie Pharma (API AU): Scheme Booklet Out. Meeting On The 17 March

By David Blennerhassett

  • Australian Pharmaceutical Industries (API AU)‘s Scheme Booklet is now out. The Scheme Meeting will be held on the 17 March with possible implementation on the 31 March.  
  • The Independent Expert has concluded this US$600mn Offer is fair and reasonable and in the best interest of Senex shareholders.
  • The Offer price is full. And trading very tight to terms.

Potential Additions and Deletions to KOSDAQ150 Rebalance in June 2022

By Douglas Kim

  • In this insight, we discuss the potential additions and deletions in the upcoming June 2022 KOSDAQ150 rebalance.
  • The top 10 potential inclusions of KOSDAQ150 are on average down 2.8% YTD, outperforming KOSDAQ which is down 15.1% YTD. 
  • The top 10 potential exclusions of KOSDAQ150 are down on average 21.6% YTD, underperforming KOSDAQ which is down 15.1% in the same period. 

SBI Sumishin NetBank (7163 JP) IPO Details, Fundamentals Tearsheet, and Likely Index Treatment

By Travis Lundy

  • On 15 February, SBI Holdings (8473 JP) and Sumitomo Mitsui Trust Holdings (8309 JP) announced the likely details/schedule of the IPO of their joint venture online bank.
  • Pre-Announcement media commentary had suggested an IPO of US$1bn in size and a potential market cap in the range of ¥300-400bn. 
  • The stock is likely to see significant interest because of its growthy business model, and non-negligible index buying at end-March and end-April, especially if it prices at the high end.

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Feb 16
0

Event-Driven: James Hardie Industries Cdi, SMC Corp, Resonant, Tata Consultancy Svcs, Dentsu Inc, Bukwang Pharmaceutical, Mapletree North Asia Commercial Trust, Sixt SE, Naturgy Energy Group SA, Lg Innotek and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • S&P/ASX Index Rebalance Preview (March 2022): A Busy Rebalance Across Indices
  • SMC (6273) Buyback – Small Short Sharp
  • There Are Offer Premiums. And Then There’s Resonant’s
  • Tata Consultancy Services (TCS IN): US$2.4bn Mega Buyback
  • Dentsu BIG Buyback – Both Larger and Smaller Than It Appears
  • Initial Thoughts on the KOSPI200 Rebalance in June 2022
  • MCT and MNACT’s Options for Dealing with Quarz’s Campaign
  • Liquid Universe of European Ordinary and Preferred Shares: February ‘22 Report
  • Demerger Plans for Naturgy
  • Korea Local Metaverse ETFs: Passive Flow Preview

S&P/ASX Index Rebalance Preview (March 2022): A Busy Rebalance Across Indices

By Brian Freitas

  • There are just 3 trading days to go in the review period for the March rebalance of the S&P/ASX family of indices. There will be plenty of changes.
  • We see one change for the ASX20, one change for the ASX50, up to four changes for the ASX200 and up to 15 adds/11 deletes for the ASX300.
  • There will be a large impact from passive trading on quite a few stocks. There will be same way flow on some stocks from the FTSE AW/AC trackers.

SMC (6273) Buyback – Small Short Sharp

By Travis Lundy

  • SMC Corp (6273 JP) announced better Q3 and an upward revision to still-below consensus for this year. Consensus is for up-and-to-the-right the next few years (but implied Q4 looks light).
  • The company raised its dividend so now it is 1% yield.
  • And the company announced a small but intriguing buyback. If you own the stock or trade in the space, it is worth understanding

There Are Offer Premiums. And Then There’s Resonant’s

By David Blennerhassett

  • A 266% premium to last close. That is what Murata Manufacturing (6981 JP) is Offering for 4.2%-held Resonant (RESN US).
  • The $4.50/share Offer price was last exceeded a little under a year ago. Shares have rolled over 84% since last February following an exuberant, meteoric spike over Resonant’s RF capabilities. 
  • The Offer is conditional on attaining ownership of 50% of shares out, including Murata’s stake.  

Tata Consultancy Services (TCS IN): US$2.4bn Mega Buyback

By Janaghan Jeyakumar, CFA

  • Indian IT giant Tata Consultancy Svcs (TCS IN) released their public announcement document for their latest buyback after market close on 14th February 2022. 
  • The company is planning to spend up to INR180bn (~US$2.4bn) which is one of the largest amounts spent in Tender Offer-style Buybacks in India.
  • Below is a closer look at the details of this Buyback.

Dentsu BIG Buyback – Both Larger and Smaller Than It Appears

By Travis Lundy

  • Yesterday 14 February, Dentsu announced bte profits, and guidance for 2022 which appears in-line to slightly strong in terms of revenue, slightly weak/conservative in terms of IFRS/GAAP OP.
  • The company also announced what appears to be a BIG buyback. 
  • Looks are deceiving, but somehow not, but there are catches in both directions. If you have a flow axe, it is worth knowing the flow details.

Initial Thoughts on the KOSPI200 Rebalance in June 2022

By Douglas Kim

  • In this insight, we discuss the potential additions and deletions in the upcoming June 2022 KOSPI200 rebalance.
  • These top 10potential inclusionsare down on average 4.4% YTD, outperforming KOSPI which is down 10.1% YTD.
  • These top 10 potential exclusions are down on average 12.3% YTD, underperforming KOSPI which is down 10.1% YTD.

MCT and MNACT’s Options for Dealing with Quarz’s Campaign

By Arun George

  • Quarz Capital’s open letter urges Mapletree North Asia Commercial Trust (MAGIC SP)’s (MNACT) board to protect unitholders’ interest and negotiate for a higher offer from Mapletree Commercial Trust (MCT SP).
  • MCT has three options – keep the terms unchanged, improve the terms or support MNACT’s board benchmarking the merger vs alternative transactions.   
  • MCT’s likely move is to keep terms unchanged and seek shareholder approval. MNACT’s board can appease unitholders by exploring alternative transactions.   

Liquid Universe of European Ordinary and Preferred Shares: February ‘22 Report

By Jesus Rodriguez Aguilar

  • Spreads have generally tightened across our liquid universe, 410 bps in the case of Volkswagen. Spreads in Sixt (45.7%) and Schroders (37%) are worth mentioning.
  • Recommendations Long ords / short prefs: Fuchs Petrolub, Henkel, Handelsbanken.
  • Recommendations Long prefs / short ords: BMW, Grifols, Roche, Telecom Italia (takeover interest), Volkswagen.

Demerger Plans for Naturgy

By Jesus Rodriguez Aguilar

  • Naturgy Energy Group SA (NTGY SM) surprised the market by announcing its division into two listed companies: one for regulated network assets, and the other for liberalised businesses (generation & commercialisation/marketing).
  • Naturgy is trading at 10.1x EV/2021a EBITDA and at a demanding 21.9x P/E, higher than Iberdrola SA (IBE SM)’s 16.3x and Endesa SA (ELE SM)’s 11.5x.
  • Strategies: pair trades long REE SM/short NTGY SM or long ENG SM/short NTGY SM. Risk: this strategy assumes that both CriteriaCaixa and IFM will stop acquiring shares of Naturgy.

Korea Local Metaverse ETFs: Passive Flow Preview

By Sanghyun Park

  • Among Korea’s local metaverse ETFs, the Big Three have significant AUMs. At yesterday’s closing prices, their AUMs are ₩0.41T, ₩0.40T, and ₩0.20T, respectively. Their total is now 1 trillion won.
  • Those on which we can perform stable momentum trading are the 14 stocks included in all three ETFs. Passive funds account for +3% of MC in half of these names.
  • Weighting adjustment uses keyword relevance. So, estimation is not easy. Nevertheless, since the absolute value does not change significantly, we can reduce the error by using the previous rebalancing weighting.

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